Snap Ends $400 Million AI Search Partnership with Perplexity

What happened

Snap revealed in its quarterly earnings report on Wednesday that its $400 million partnership with Perplexity AI has ended. The deal, which was intended to integrate Perplexity's AI-powered search directly into the Snapchat messaging interface, was terminated during the first quarter of 2026. Snap described the split as amicable, noting that the companies reached a point where they could no longer agree on a path forward for the product.

What's new in this update

During the earnings disclosure, Snap confirmed that its sales guidance for the remainder of the year now assumes zero financial contribution from Perplexity. This is a significant shift from the third quarter of 2025, when the company expected the deal—which included $400 million in cash and equity over one year—to begin contributing to its financials in 2026.

Key details

The original agreement was designed to allow Snapchat users to ask questions and receive conversational answers from Perplexity within the app's Chat interface. While the integration was tested with select users, Snap executives revealed in February that the two firms had not yet reached a mutual agreement on how to implement a platform-wide rollout. Following the termination, Snap’s guidance reflects the loss of this expected revenue stream.

Background and context

Snap CEO Evan Spiegel originally framed the Perplexity deal as a way to enhance discovery on Snapchat through innovative AI partnerships. Despite the end of this specific collaboration, Snap's core metrics remain stable; the company reported a 5% year-over-year increase in daily active users, reaching 483 million. This growth occurred even as the company executed a 16% workforce reduction in April, affecting 1,000 employees as part of a shift toward AI-driven efficiencies.

What to watch next

Snap's focus appears to be shifting toward proprietary hardware and internal AI capabilities. The company is expected to share more details regarding its 'intelligent eyewear' and AR Spectacles at the AWE conference on June 16. With the Perplexity deal off the table, investors will likely look for how Snap intends to leverage its growing user base to drive revenue through its own AI tools and augmented reality features.